http://www.infracapmlp.com/about/management.html - The ALPS Alerian MLP ETF (NYSEArca: AMLP), the largest exchange traded fund holding master limited partnerships (MLPs), is higher by more than 6% over the past three months as MLPs are benefiting from higher oil prices and investors’ thirst for higher-yielding assets.

1. Assessing MLP Valuations with ETFs
The ALPS Alerian MLP ETF (NYSEArca: AMLP), the largest exchange traded fund
holding master limited partnerships (MLPs), is higher by more than 6% over the past
three months as MLPs are benefiting from higher oil prices and investors’ thirst for
higher-yielding assets. That quick run-up has some market observers pondering MLP
valuations.
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MLPs primarily deal with the distribution and storage of energy products, so their
business model is less reliant on the commodities market since MLPs profit off the
quantity of oil and natural gas they are able to move around.
With the markets flooded with oil and prices still depressed, basic economic theory
suggests that consumption could rise to capitalize on the cheap crude. With higher
consumption, MLP tollkeepers could profit off the increased transportation or storage
of energy.
“While there is less upside after the strong upward move over the past four months, we
believe the AMZI’s above average yield of 7.07% and yield spread of 548 basis points
create a positive skew in the risk/reward profile. These metrics compare favorably with
the average yield of 6.3% and average spread of 415 basis points over the past five
years, plus the long-term median yield of 6.8% and median spread of 370 basis points
based on data since 1996,” according to part of a D.A. Davidson note posted by Amey
Stone of Barron’s.
To qualify as an MLP, the companies pass through at least 90% of their income to
investors, making the assets an attractive yield-generating investment.
MLPs don’t make their money based on oil or gas prices. Unlike other energy sector
stocks, MLPs primarily deal with the distribution and storage of energy products, so
their business model is less reliant on the commodities market since MLPs profit off the
quantity of oil and natural gas they are able to move around.